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News About Tech, Money and InnovationTue, 31 Mar 2015 22:38:55 +0000en-UShourly1http://wordpress.org/?v=4.1.1Copyright 2015, VentureBeatThe year of the deal? Game industry already has more than $5B in mergers and acquisitions in 2014http://venturebeat.com/2014/04/02/the-year-of-the-deal-game-industry-already-has-more-than-5b-in-mergers-and-acquisitions-in-2014/
http://venturebeat.com/2014/04/02/the-year-of-the-deal-game-industry-already-has-more-than-5b-in-mergers-and-acquisitions-in-2014/#commentsWed, 02 Apr 2014 18:15:53 +0000http://venturebeat.com/?p=1298382Blockbuster deals around the world have '14 on pace to demolish 2013's record year for acquisitions in the game market.
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The game industry is consolidating faster than ever before as major companies in Asia and North America continue to make deals to absorb more value.

In the first quarter of 2014, the game industry has already had more than $5 billion in mergers and acquisitions, according to a new report from investment bank Digi-Capital. That nearly matches 2013’s full-year total of $5.6 billion. These moves are coming from American companies (like Facebook and Zynga) and Asian investors (such as Tencent and Softbank). Mobile developers continue to attract the most interest, but tech startups and developers of PC massively multiplayer online games were also major targets. Gamers spent $16 billion on mobile gaming alone in 2013. That number is likely going to grow throughout this year, and acquisitions offer major companies a quick way to capture that spending.

“Dominated by blockbuster transactions in both Asia and America, the games M&A market has scaled to new heights for this stage of the cycle,” Digi-Capital managing director Tim Merel said in a statement. “Q1 2014 has been unprecedented, and it will be fascinating to see how this will change the course of the games market in the coming quarter.”

The aforementioned blockbuster deals include Facebook acquiring the virtual-reality startup Oculus VR for $2 billion as well as Zynga picking up CSR Racing mobile developer NaturalMotion for $527 million. In Asia, megainvestor Tencent (which owns League of Legends developer Riot Games) purchased a stake in Korean game firm CJ E&M.

This continues a trend from 2013, which was a record year for mergers and acquisitions (a record that is likely going to get demolished this year). Nine of the 10 biggest deals last year all had Asian buyers, and Tencent and Softbank continue to top Digi-Capital’s pyramid of potential game “consolidators.” Other companies at the top of this list — which are the corporations most capable of acquiring others — includes Apple, Nintendo, Microsoft, and Activision.

Above: Digi-Capital’s chart illustrating the companies most capable of making big acquisitions.

Image Credit: Digi-Capital

The growth in acquisitions signifies that sectors like mobile have a lot of money at stake and also that larger companies aren’t equipped to capitalize on the opportunities. The rest of the year will likely see more mergers and acquisitions as companies with lots of money target startups that offer a way to corner valuable and growing markets.

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]]>0The year of the deal? Game industry already has more than $5B in mergers and acquisitions in 2014Don Mattrick shows his poker hand for turning Zynga around in mobile (interview)http://venturebeat.com/2014/03/03/ceo-don-mattrick-shows-his-poker-hand-for-turning-around-zynga-in-mobile-interview/
http://venturebeat.com/2014/03/03/ceo-don-mattrick-shows-his-poker-hand-for-turning-around-zynga-in-mobile-interview/#commentsMon, 03 Mar 2014 16:00:42 +0000http://venturebeat.com/?p=1012377The Zynga CEO is putting his stamp on the company, starting with three new mobile versions of flagship games.
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Seven months into his tenure as chief executive of Zynga, Don Mattrick is making some bold moves.

Today, he is announcing three major mobile titles based on Zynga flagship franchises Words With Friends, FarmVille, and Zynga Poker. A month ago, he agreed to pay $527 million for NaturalMotion, the publisher of hot mobile titles like CSR Racing and Clumsy Ninja. Many executives have left the company in recent months and Mattrick is replacing them with his own picks, like chief operating officer Clive Downie.

The turnaround is a tough one, as Zynga missed big opportunities bridging the gap from social games to mobile. It turned a profit last year — but a small one. It has shed hundreds of employees, including many seasoned developers. The company is shutting its YoVille game even though it still has loyal fans. And it still isn’t anywhere near its goal of dominating the mobile charts the way it once reigned on Facebook.

But Mattrick believes that the hits will come as Zynga doubles down on five major game brands and takes more creative risks. In an interview, he reminded us that more than a billion people have played Zynga games in the past six years, including 400 million that have played FarmVille. Here’s an edited transcript of our interview. (Also see our analysis of Zynga and previews of Zynga Poker, Words With Friends, and FarmVille 2: Country Escape).

GamesBeat: From your perspective, it feels like you guys are being gutsy with some of your game-design changes.

Above: Don Mattrick, CEO of Zynga.

Image Credit: Zynga

Don Mattrick: The first thing we’re trying to do is accomplishing more progress in the passage of time. We’ve doubled down on important things that our company should be doing to support our aspirations for the business that we want to become.

We’re trying to make sure the company becomes a content leader in free to play. We’ve been building stronger teams. We’re paying more attention to consumer research. We’re spending time thinking about how our experiences are differentiated relative to the competition. We’re trying to be thoughtful about the opportunity, which is, “Hey, we should be creating experiences in categories that we know consumers love.”

As you know, in entertainment, the top 20 in any category account for more than 50 percent of the profit pools that are available. We’re fortifying, committing, and building capabilities to create hits that show up in the top 20.

We’ve created an opportunity for a company like Supercell with Hay Day by not bringing FarmVille to mobile, building an iOS and an Android version that works online and offline, building an economic model where you can have trading between the Web and mobile versions, innovating on the game design, making it performant on those mobile devices. That’s what the team’s been doing now. I’m pretty excited about it. The testing has been well-received. What did you think of it?

GamesBeat: FarmVille 2 definitely translates a lot of those improvements over to mobile. With Zynga Poker and Words With Friends, it almost seems like you guys want to disrupt yourselves before someone comes to disrupt you, especially on mobile.

Mattrick: Here’s what we’ve gotta do. We’ve gotta overdeliver value to consumers, in any product category where we are. That’s the job. As time passes, our teams get more capable. They learn more from having an audience. We get an opportunity to give two things: things that are proven, that people love, and things that are innovative, that add to the surprise and delight of the experience. Those are the things the teams are executing on. They’re doing it in a thoughtful way.

Above: The new Zynga Poker.

Image Credit: Zynga

The good news is, from an investment standpoint, those results are showing up in our financial measures. We expect that 2014 will be a year of growth for the company. I’m pretty excited about that.

GamesBeat: One of your guys said he was excited about the creative confidence that the company now has. You’re willing to take some risks, like changing up a poker game that’s working really well.

Mattrick: From being in the entertainment space for a long time, we should be aspiring to create. We should be aspiring to be great. The more time you get to participate, the more time you get to perfect your craft. We’re adding more art, more intuition, more consumer research, and at the same time, we’re building on some of the science of running great app-scale live services. We’re blending those things together.

GamesBeat: It seems challenging to try to do that when you have a lot of executive turnover and employee downsizing as well.

Mattrick: A big part of that I’m actually pushing on and leading. I audited the management team when I joined. I asked them, “What do you do? How are you making people better? What do you want to create over the next three years?” The people who didn’t have a great answer to that question, they aren’t here anymore.

The people who are here are energized. They think it’s a privilege to create. We’ve been dealing with core issues of our business, getting our resources and capabilities allocated first on content, second on running a great set of experiences, building tools and technology, and then having our support functions be driven by world-class individuals more than large groups of people. We’ve increased accountability. We’ve made things more discrete.

I love some of the new people that we’ve brought in, like Clive Downie. He’s been doing this for 20-plus years. I had a chance to work with him at EA. He was driving Ngmoco and DeNA for the last six years in the mobile space. There are multiple examples of new people who’ve come in. They’re excited about the industry space. They have a provocative point of view. They’ve created billion-dollar successes before in multiple franchises. People are now starting to frame up what’s possible.

You probably read the King filing. Pretty amazing results. If anything, it demonstrates the accelerated growth in our category, the size of the profit pool, and the size of the opportunity that’s there. We’ve been under-indexing. We’re now closing some of that gap. We have hard work to do, but we’re making material progress each quarter.

Above: Torsten Reil, CEO of Natural Motion, shows off Clumsy Ninja.

Image Credit: Dean Takahashi

GamesBeat: It seems like you’re always one game away from a blockbuster. How do you feel about taking more shots on goal?

Mattrick: I’m super excited. Zynga, in its first five years, accomplished things that most companies don’t get to — a billion dollars in revenue, a billion dollars in operating income, and touched a billion consumers in the first five years. Now, when you look at it, the company in its peak year generated $393 million in earnings. At some point in the future, I’d like us to get to that level and beyond.

We’re going to do that in two ways. We’re going to nurture proven hits, things like FarmVille, Poker, social casino, Words With Friends. And we’re going to create new ones. We’ve added what I think is the best independent creative group on the planet with NaturalMotion. Have you spent time with Torsten Reil and Barclay Deeming [of NaturalMotion]?

GamesBeat: Torsten mostly, yeah.

Mattrick: He’s the real deal. Oxford graduate, spent time studying how motion occurs, broke it down into a physics problem, a neural-learning problem, and an animation problem. He wrote tools that showed up in Lord of the Rings. He started translating that to the PC and console space. He wrote the tech pipeline that powers Grand Theft Auto, that showed up in GTA IV and V and Red Dead Redemption.

Then he started shipping mobile products. With the few at-bats that those teams have had, they’ve been able to ship things that have charted number one. They have kept all of that tools and tech expertise for exclusive use in the mobile space. That gives us a point of differentiation, an ability to create things that are important and valuable to consumers. We now have five categories — cars, people, farming, poker/casino, and Words With Friends.

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]]>0Don Mattrick shows his poker hand for turning Zynga around in mobile (interview)Zynga chief operating officer Downie describes its new gameplan (interview)http://venturebeat.com/2014/01/31/zyngas-coo-clive-downie-describes-zyngas-new-game-plan-interview/
http://venturebeat.com/2014/01/31/zyngas-coo-clive-downie-describes-zyngas-new-game-plan-interview/#commentsFri, 31 Jan 2014 20:00:47 +0000http://venturebeat.com/?p=889537Clive Downie says the distinction between casual and hardcore games no longer matters at Zynga. The focus is on great games.
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Zynga pioneered social gaming on Facebook, and it has been trying for a couple of years to replicate that magic on mobile. That path has been much more difficult than anyone thought. Yesterday, it announced it would accelerate that effort by paying $527 million to acquire Natural Motion, maker of CSR Racing and Clumsy Ninja.

Zynga also said that it was beginning to turn around financially, but it also made another round of layoffs, cutting 314 employees, or 15 percent of its total. That shows the company isn’t out of the woods yet.

Clive Downie, the chief operating officer at Zynga, has been on the job for three months, reporting to new CEO Don Mattrick. Together, they’ve created a new gameplan for getting Zynga’s mojo back, and they revealed it for the first time yesterday. We got a chance to ask Downie detailed questions about that comeback plan in an interview after the announcement. Here’s an edited transcript.

GamesBeat: How are you enjoying your first few months on the job?

Above: Clive Downie left DeNA West to become COO at Zynga.

Image Credit: Zynga

Clive Downie: I’m loving it, although we had to make some hard decisions today in one area.

GamesBeat: Do the layoffs signal that Zynga may shut down other games? Or are you thinking of that as more like an across-the-board cutback, where a small percentage of each team might be cut?

Downie: The goal of this was to execute better and create meaningful leverage and efficiencies. I believe it’s the right envelope to run more than 30 live game services and create new against our growth aspirations and against our content strategy that I outlined in the call. The decisions we made today give us the right space to build on through 2014. We don’t want to be in a constant state of transition.

GamesBeat: You have shut down some older games. How do you decide that? A given game may not be high among the priorities at the moment. But I’m curious why you can’t just keep running it. Maybe it still has a million players. It seems like you could make money just running an old game, but you guys appear to have decided that’s not a good idea?

Downie: Right now, we run more than 30 live games that are delighting many millions of consumers every day. Some of them are well over a year old, or multiple years. We aren’t in the business of closing our products. We made a very specific decision recently with regard to YoVille. We always take a customer-centric view of our games. We value the long-term sustainability of our game communities, and we always strive to keep them active as long as possible within our game-lifecycle framework.

We do have a game-lifecycle framework. It’s not a snap decision. When this can’t happen any longer, we do look for other options. In the case of YoVille, there was a dialogue with the game’s creators about a partnership that would see the game continue to be grown and sustained by them, so that’s exciting. We’re in those discussions and we hope we can conclude them sometime soon and move on.

Our framework is about making sure that for as long as possible, our teams of people internally making games are sustaining those live game services and making them better, until such a point as we think, “For this good of our consumers, we should be having those game creators work on something else. They should work on making new things.” It’s always that balance between sustaining something and getting to something new.

Above: Clumsy Ninja goes through the hoops.

Image Credit: NaturalMotion

GamesBeat: The Euphoria game engine is one of these big jewels at NaturalMotion. Would you go so far as to say that the decision to buy them was dependent on Euphoria? Will Zynga teams use Euphoria, or might that be something NaturalMotion itself would be best assigned to do.

Downie: I’m sure you’ve played CSR and Clumsy Ninja. Clumsy Ninja is a wonderful product with its best months and years ahead of it. Our decision to bring NaturalMotion into the family is because they make great games. They make great games because they have two things going for them that they’ve grown over a decade. They have excellent creative instincts and talent, and they have an excellent technology platform and tool set in Euphoria to realize that creativity.

It wasn’t just for Euphoria that we brought them into the family. Euphoria is a driving force that empowers that creativity. The end result is why we brought them into the family. They make great games, which makes it exciting to be able to work with them.

To your second question, will we look for ways to utilize Euphoria within the core of Zynga? Absolutely.

GamesBeat: The distinction between hardcore games and casual games, is it still one that you make, or do you consider the combination of these two companies to simply create one focus on making great games?

Downie: The combination is focused on making number one products in the categories that we’ve identified and will continue to identify going forward. I don’t necessarily want to put a classification on the products we plan to make as far as casual or hardcore. I’ll ask you specifically. Do you think CSR is a hardcore game? It doesn’t feel like a hardcore game to me.

GamesBeat: It almost seems to fit that midcore definition pretty well.

Downie: Yeah. The great thing is, you can play it in two minutes and legitimately feel you got something worth that time investment. It’s superaccessible. Anyone can pick it up and play it and enjoy. And then with Clumsy Ninja — I’m sure you’ve played that — it’s just a wonderful simulation of a person in your pocket that you can tune into and have fun with and smile with.

GamesBeat: This isn’t necessarily a strategic shift in that sense, then? It’s not like Zynga is going into hardcore gaming.

Downie: [Chuckles] The answer is no, because I don’t particularly believe those products are hardcore. They’re very accessible to many consumers around the world who want to participate in the categories and the themes that they use in the product.

GamesBeat: The priority market going forward seems to be mobile. These guys have demonstrated definite success in mobile. Is there a conclusion to make about this, that mobile investment is your priority?

Downie: We have an emphasis on growing our mobile consumer base by making No. 1 products in those categories where mobile consumers are and where we believe we can make a difference and break through social to those categories. But we make games where the consumers are in those categories, based on our expertise.

We have a strong Facebook and web business. Our poker product is strong there. Words with Friends is strong there. FarmVille is strong there. We’ll continue to innovate and grow and sustain those businesses. We have a new product launch coming on Facebook imminently with CastleVille Legends, which was mobile first. We make games where our consumers are, and we’ll continue to do that.

The social-gaming company that made its fortune on Facebook revealed a plan to acquire mobile studio NaturalMotion for $527 million in cash and equity. NaturalMotion is best known for its CSR Racing game for iOS and Android, which is currently among the top 100 highest-grossing mobile apps.

Zynga will pay $391 million in cash and make up the rest with 39.8 million in Zynga shares. Around 11.6 million of those shares will go to NaturalMotion employees who are joining Zynga. Zynga is making this move while simultaneously cutting 314 jobs.

“We believe that bringing Zynga and NaturalMotion together is the right step at the right time,” Zynga chief executive officer Don Mattrick said. “Our acquisition of NaturalMotion will allow us to significantly expand our creative pipeline, accelerate our mobile growth, and bring next-generation technology and tools to Zynga that we believe will fast track our ability to deliver more hit games. Their creative portfolio aligns perfectly with our content strategy as Zynga will now have five top brands and capabilities in the farm, casino, words, racing and people categories. We are confident that we will build upon our market position with complementary strengths to generate long-term value for our consumers, our employees, and our shareholders.”

CSR Racing is the top-grossing game in the racing category on iOS. The game is notable due to its huge amount of success despite having minimal interactivity. Instead of steering the cars and controlling the gas and brake pedals, CSR players only have to time the shifting of their automobiles’ manual transmissions.

In addition to CSR Racing, NaturalMotion has a popular action game called Clumsy Ninja for iOS that uses the studio’s Euphoria physics engine. This technology was previously used in games like the best-selling Grand Theft Auto IV.

“NaturalMotion set out to make games that wow millions of people by being obsessed with quality, disrupting and creating genres, and using almost magical technology,” NaturalMotion chief executive Torsten Reil said. “When we started talking to Don [Mattrick] and his team, it quickly became clear that they shared this vision. Don’s background in triple-A games and Zynga’s expertise in social gameplay and large-scale game operations will be invaluable to helping us grow our existing CSR and Clumsy Ninja franchises and maximize the breakout potential of our upcoming titles. We’ve reached our first milestones — creating the No. 1 top-grossing and top-free titles — on our own. We can’t wait to see what we can achieve together with Zynga.”

As for the layoffs, Mattrcik explained that it was to help cut costs and to “create a more efficient organization.”

“We don’t take these decisions lightly, but we believe these actions will allow us to create a clearer, faster path to win,” said Mattrick.

While Facebook has made most of its cash through social games on Facebook, it has had mobile hits like Words With Friends. As Facebook’s viability as a social-gaming platform continues to wane, Zynga is still trying to figure out how to make its products work on mobile. This acquisition could help with that transition.

Mobile gaming is different from traditional consoles in a few ways. For example, the audience on mobile can have a much wider range of skill levels.

Developer Naturalmotion Games discovered just how varied iOS and Android gamers are when it first put out its driving game CSR Racing. The mobile title has players facing off against other gamers in drag races where you don’t have to steer, but you just have to shift at the right time.

The studio wanted to make CSR Racing’s first level very easy so that players wouldn’t give up because they thought the game is too difficult. Naturalmotion put players in a faster car than the computer-controlled opponent and purposefully messed up the A.I. to screw up its shifting.

“[The player] should just plow ahead,” Naturalmotion chief executive officer Torsten Reil said during a talk at the DICE Europe developer conference. “In the first versions of this, we thought, ‘This isn’t a game anymore. This is un-loseable.'”

That wasn’t the case. It turned out that 36 percent of CSR Racing players lost the first game.

“This shows how different this audience can be, especially if you do a mass market game.” said Reil. “CSR is at around 70 million downloads.”

Reil says that if developers can understand that the audience is different, then they can mitigate the risks of appealing to this audience — and that has a lot of benefits.

“If you create a game that [is different] — if you take a risk — you are essentially in a blue ocean,” said Reil.

“Blue ocean” refers to the strategy of branching out from an established market to reach untapped markets and customers.

“You don’t have to compete with other games,” he said. “People will talk about your games because they want to talk about it — because it’s new and newsworthy. You don’t have the issue where you are copying other people’s games where eventually you are all playing in the same playing field and you have to do a lot of user acquisition.”

CSR Racing went to the top of the iOS highest-grossing apps chart. It made $12 million in its first month and is still producing strong revenues, according to Naturalmotion.

Since CSR Racing established the drag-racing genre on mobile phones, other developers are following it including Kabam with its Fast & Furious 6: The Gamemovie-license title.

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]]>136 percent of gamers lost the ‘unfailable’ tutorial level in CSR RacingHow all app publishers can benefit from the mobile gaming industry’s best practiceshttp://venturebeat.com/2013/04/03/how-all-app-publishers-can-benefit-from-the-mobile-gaming-industrys-best-practices/
http://venturebeat.com/2013/04/03/how-all-app-publishers-can-benefit-from-the-mobile-gaming-industrys-best-practices/#commentsThu, 04 Apr 2013 01:50:22 +0000http://venturebeat.com/?p=707931Guest:Free-to-play has revolutionized the monetization model in gaming by charging players based on their willingness to pay, instead of displaying one set price for all. Indeed, through a dynamic pricing scheme for in-app purchase items, free-to-play has enabled game publishers to monetize the whole of the price/demand curve.
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If free-to-play game publishers have made it to the top of the app stores’ grossing charts, it’s for one good reason: Monetizing efficiently was not a choice. Indeed, the free-to-play business model forced publishers to develop and implement the mechanics allowing for successful monetization right from the start.

The good news is, in the process they developed some great practices for the mobile industry as a whole.

As competition continues to heat up in the mobile space, with close to 800,000 apps available on the App Store and as many on Google Play, here’s how all app marketers can learn from them.

Changing the Game

Free-to-play has revolutionized the monetization model in gaming by charging players based on their willingness to pay, instead of displaying one set price for all. Indeed, through a dynamic pricing scheme for in-app purchase items, free-to-play has enabled game publishers to monetize the whole of the price/demand curve.

By removing the lower price limit and allowing a vast majority of users to play the game entirely for free, it has triggered two positive effects: On the one hand, it enabled the generation of high volumes of players, and on the other, it made it possible to monetize part of the long tail of users, either because they are ready to pay smaller amounts, or by showing them ad offers.

By removing the upper price limit, it also made it possible for the most committed players to spend an unlimited amount of money in the game, therefore unleashing an enormous monetization potential. Aeria Games, for example, the publisher of the card-battle game Monster Paradise, recently reported that its ARPPU (Average Revenue Per Paying User) had seen peaks of $90 and above over the holiday season.

Understanding mobile

The most striking realization of Free-to-Play’s potential on mobile is the rise of mid-core games, such as Supercell’s Clash of Clans (which is reported to make $1 million a day, along with the company’s other title, Hay Day). The success of the mid-core genre stands as a strong example of how mobile audiences should be approached: by addressing as many users as possible, but also by understanding and taking advantage of the great variety of mobile usage patterns.

Whether your app is used a couple minutes here and there, 30 minutes during the daily commute, or the whole weekend long, it should be structured in a way that offers (at least) the value that every user expects from it.

Learning from the challenges of free

The free-to-play model, while offering a whole new perspective on monetization, also brought along some major challenges.

First, acquiring users was no longer synonymous with monetizing them. For players to be converted into payers, they also had to be retained and engaged. So publishers had to develop a thorough understanding of the behaviors and usage patterns at play within their game. This was achieved through the implementation of in-app analytics.

For instance, Struan Robertson of NaturalMotion, the successful publisher of free-to-play hits MyHorse and CSR Racing, explained that you should spend time each day looking at your dashboard of stats.

Then, as the cost of acquiring users kept soaring, it became vital for game publishers to know at which price they could buy additional players in order to remain profitable. Sho Masuda, the VP of user acquisition at Japanese publisher Gree, reported that the company used the large amount of data collected over time to forecast what the value of an install for a particular game is going to be.

Finally, quality of players can vary greatly across the traffic sources employed for user acquisition. This in turn strongly enforced the need to accurately track in-app user activity to determine which sources perform best so you can fine-tune the ad spend and optimize the marketing budgets.

Calling all app marketers

To make the most out of their monetization potential — even if survival is not immediately at stake — all app marketers can benefit from the lessons of free:

Understand, consider and engage all your users.

Unleash the monetization potential of your biggest fans.

Understand and take advantage of mobile behaviors and usage patterns through in-app analytics.

This story was contributed by Eric Seufert of mobile game developer Grey Area Labs.

Retention is the foundation of the free-to-play model. If retention metrics don’t hold, a free-to-play title won’t make money. Conceptually, this makes sense: Lifetime Customer Value is a function of time spent in-game (lifetime) and money spent in-game (value), and most users won’t do the latter until they’ve invested some minimum amount of time into it.

The problem with retention metrics is that they can’t be easily “fixed” through development iteration. Retention is a proxy for fun, and fun is binary: A game is either fun or it isn’t. Short of being able to quickly fix retention, a developer is well served by understanding why her game is bleeding users. This article will identify three reasons why your free-to-play users aren’t coming back.

Some free-to-play developers think a user’s scarcest resource is money, which is a mistake. If a user is playing your game on an iPhone, iPad, or a high-end Android device, she has disposable income to spend on entertainment. A user’s scarcest resource is her time, and if you don’t communicate to her that your product is of the highest quality and worthy of that investment from the very first game session, she’ll delete it.

Your game needs a “quality hook” — something that allows the user to immediately discern that it was professionally built and not the product of a few crates of Mountain Dew and three weekends in a basement. Most of the time, this is done through graphics that have been obsessively perfected, but it can also take other forms: realistic physics, a new gameplay format, or elements of the real world convincingly and authentically integrated into gameplay.

You don’t give the impression of deep gameplay

Back to the scarcity of time: When I download a new game, I won’t invest any time into it unless I think it’ll provide me with entertainment for months to come. If your game doesn’t give the impression of a long lifetime of rich gameplay, a user won’t take a gamble on it. Free-to-play gamers are looking for a relationship, not a one-night stand.

Players will see the potential to play a game for months or even years through a geometric pricing curve and an extensive product catalogue. The worst way to communicate deep gameplay is by not having anything but renewables or one-off upgrades. Users want to return to good games, but they want to feel that their time is being rewarded with new, ever-richer experiences. Free-to-play gamers won’t give your game the benefit of the doubt – deep gameplay must be communicated early and acutely.

Gamers have distinct tastes, and there’s a big difference between a farm simulator and a shooter. Stuffing gameplay elements from every genre into your game won’t endear you to all gamers; it will merely obfuscate the value proposition to your target demographic and make your game look schizophrenic.

The best games focus on a single core gameplay mechanic and build a rich experience around that. If a player can’t quickly ascertain your game’s core experience without being distracted by multiple gimmicks, then she won’t play it again. Players need to understand what exactly they’re getting good at through progressing in your game: Are they becoming more accurate at shooting? Are they improving their timing in fighting? Are they becoming shrewder in their command of in-game resources? If this progression isn’t clear, players will have a hard time becoming engaged with your game.

Conclusion

Free-to-play gamers aren’t to be taken for granted; the fact that a title is free doesn’t mean players will tolerate bland, uninspired gameplay from it. When your game is first launched by a player, it is competing not only for her time but also with every other free-to-play game that she could download almost instantly.

Low day-one retention indicates a failure to communicate the points outlined above, but it also indicates that players, for any number of other reasons, simply don’t like your game. And short of a glowing recommendation from a close friend, that perception is almost impossible to reverse.

Eric Seufert is the head of marketing and user acquisition at Grey Area Labs, the Helsinki-based mobile developer behind Shadow Cities. He blogs regularly at ufert.se.

Few companies have contributed as much to the flowing of independently produced games as Unity Technologies. The maker of a 3D-graphics game development platform, Unity 3D, got its start in Copenhagen, and now it is based in San Francisco. More than 1.3 million developers are using its tools to create gee-whiz graphics in their iOS, Android, console, PC, and web-based games. Nintendo’s new Wii U console will support games built with Unity, as will the upcoming Ouya Android-based game console. The pattern here? Unity wants to be the engine for multiplatform games, period.

Slowly but surely, Unity has risen from the low-end to support better and better graphics, chasing after high-end PC and console engine makers such as Epic Games. David Helgason, the 34-year-old chief executive and co-founder of the company, has guided this revolution in indie games and better development tools.

More than 139 million players have installed the Unity plug-in on their web browsers since 2008, making Unity into one of the world’s biggest game platforms. Unity distributes 3D game on new platforms through its side-business Union, and it has created its own marketplace where developers sell 3D assets to each other. Here’s our edited transcript of our interview with Helgason.

GamesBeat: Tell us where you’re growing.

David Helgason: We’re firing on all cylinders. It’s kind of crazy. We’re having another year of 100 percent growth. Now we’re touching 1.2 million, maybe 1.3 million developers, of which 300,000 used Unity in the last month. The base of developers keeps growing.

More than 30 percent of our business now comes from Asia. The Asian expansion we’ve done in the last 18 months has been incredibly successful. Japan is our second-biggest market now. Being out there, we’re doing things that we couldn’t really do from our western base.

One of them is the Nintendo partnership, where Unity becomes the default development kit for the Wii U. When you get a Wii U dev kit, you’ll be getting a license for Unity on the Wii U from Nintendo. It’s an industry first. Someone at your site just wrote an article about the Wii U and indie games. That hammers in how much Nintendo cares about ensuring that they’re strong there. It’s quite fascinating. There’s a lot of naysayers about the Wii U. But we and many other people believe that this is a smart approach for them. They’ve opened their ecosystem up to the Unity community.

And then of course we’ve been doing all this tech stuff. Unity 4 is in beta now. We’ve seen some pretty amazing things coming out of there. Our demos look like a computer-generated movie or like a Pixar movie.

Our customers have been extremely successful. There’s always the quip that, yes, it’s easy to make games with Unity, but people aren’t making money with it. It’s been hard to challenge that. But as of a few days ago, three of the top 10-grossing games in the App Store were made with Unity, including Rovio’s Bad Piggies, CSR, and Kingdoms of Camelot from Kabam.

GamesBeat: How do you measure success relative to some of the other guys, like Epic Games or whoever the competition is? How do you gauge whether you’re gaining ground?

Helgason: It’s more a question of whether they’re gaining ground on us in the mobile space. There’s way more top-grossing apps made with Unity than any other engine. Beyond that, there’s the long tail where we’ve done extremely well. We estimate several thousand games made with Unity in the App Store. Anybody else, we can’t count more than a couple of dozen. That’s how we measure success. We serve the long tail, and new revenue has been growing extremely fast as well.

GamesBeat: You have the Wii U now. You’re breaking into consoles. Where else are you moving into that the other guys used to be?

Helgason: Some the Kickstarters that are going on now — Wasteland 2 and Project Eternity are both Unity-based. Big PC projects. We’ve always seen the in-house engines as our biggest competitor, not necessarily any other company. You’d have used an in-house engine or Unreal or Crytek for games like these. So on the PC side we’re making a very strong moves. On the current-gen consoles, we haven’t made a lot of headway, although there are games that are on both PS3 and Xbox 360 that are done by the community and also upcoming titles by first parties. The Wii U will be the first console platform where we’re extremely early and extremely well-established. I’m not going to claim this, but I haven’t noticed anybody else announcing support for the Wii U. I have no idea for sure which companies will be there, but we will be there extremely early, and we expect a lot of wins on that platform.

We have a policy where we don’t announce anything until we’re completely certain that we’ll be there. We’ll hold off on a lot of announcements until we know exactly how it’s going to work.

GamesBeat: You have mobile. Do you have the same share on different platforms? Are you as represented on Android as you are on iOS?

Helgason: I would guess so? Our Android revenues are lower than our iOS revenues, but we still sell close to as many licenses on Android. The original version of Temple Run was not done on Unity, but they quickly ported it to Unity and relaunched on Android. Then they did the upgraded version on iOS, also using Unity. A lot of these games are going cross-platform. By the way, we just announced Windows Phone 8 support. Shortly afterwards, a lot of people who hadn’t announced the same thing declared Windows Phone 8 support. We think we’re also going to be enabling that platform.

GamesBeat: When you guys come up with better and better stuff, what you’re trying to do is also climb up this 3D food chain. Where you can add more and more 3D features and make it easier to create different kinds of high-end effects. Are you catching up with Unreal or the CryEngine.

Helgason: Game Developer magazine published a survey May, done by Mark DeLoura. It dealt with mobile game developers specifically. The question was, which engines are you using for your mobile development? When the results came back, 53 percent self-reported using Unity. 38 percent, were using no engine, building it themselves from the ground up. A tiny percent was an open-source framework for 2D games, and then I think six percent was Corona? They’ve slid into single digits.

We think it’s the same on both console and desktop. The biggest competitors are actually internal engines. As time goes by, the need for an agile platform increases, the complexity of technology grows, and Unity gets better at a very fast clip. What we’ve seen is that it’s increasingly uneconomical and kind of senseless to be building your own engines. There are people who’ll keep doing that for a while, like the Frostbite engine at EA. We’re not going to replace those in the next year or two. But for more and more use cases, we think we’ll be replacing other engines, in particular home-built engines.

A bit less than two years ago, we looked at ourselves and saw that we were becoming fixtures on the mobile front, but we needed to be able to seal up the high end. We needed to make it so everyone has access to the technologies they need for high-end games, whether it’s a small team or a big team. We have an extremely friendly pricing structure. It’s ridiculously friendly in most cases.

We began hiring a lot of people who came from these big studios. We have people working with us now who’ve worked on the Frostbite engine, the Glacier engine at Square Enix, and so on. We’re pushing it as hard as we can, rapidly closing the gap between the very highest end that you can think of and what Unity does. That gap is not close, but it’s closing at a geometric pace.

GamesBeat: Flash 11.4 seems to have made a little progress. What do you think of that development?

Helgason: We’re still in pre-release mode, sorting out bugs, with our Flash export. Adobe is also improving their platform, so we’ve been working with them quite closely on the engineering side. There are many limitations in Flash still, but we’ll be swatting them one by one over the next few years. Unity works quite well there. There are released games on it now. The Teenage Mutant Ninja Turtles game. A lot of small games have been built that way. Some pretty big social gaming studios are working on Unity-built and Flash-exported browser titles. That should all be coming out in the next few months. It works already, and it’s pretty sweet.

We haven’t seen the adoption we expected of it yet. I think there’s been uncertainty about the revenue share and how that’s going to work. People are starting to understand it and realize how it makes sense for their business model. We think it’s a very important part of the lineup, but one among many others. Our plugin has now been installed on 150 million machines, and we have a deal with Qihoo in China where they are working on installing it on a very large number, hundreds of millions of machines, to make that base even broader. We think our browser plugin is more relevant than ever.

Stand-alone apps for Mac and PC are kind of resurgent, though. There was a period when if it wasn’t in the browser, it didn’t matter. Now it’s more and more clear that stand-alone applications, clients for MMOs and things like that, and also smaller games sold through Steam and the Mac App Store and the upcoming Windows software store, are resurging. Once you’ve installed on a user’s machine and you have an icon on the desktop, that’s a very sticky place to be. People are realizing that running off to the web wasn’t necessarily sustainable for everyone.

GamesBeat: Mixamo was telling me they had an announcement coming up with you.

Helgason: They have this pretty cool technology that’s not exactly bundled in Unity, but you can get access to it through Unity. You can animate any character in a really flexible way. It combines well with our new animation system, which makes it extremely easy to retarget animation coming from any source, including Mixamo. We demoed it in that keynote we did. It’s a money shot for people who know something about character animation. You can take a particular complex movement and apply it to a character with very non-standard geometry — in our case it’s a big teddy bear — and have it move in a realistic way without having to craft original animation for it. Mixamo has a huge library of animation. They’re keeping their relationship with us and making it even easier for people who may not have animators on staff to have access to a lot of complex character animation.

This is the whole drive of Unity, to take all these hard things and make it flexible enough for the really big companies, and make it easy enough for individuals to use. It’s a complex design problem and it calls for more work than doing something that’s just high-end or just very simple. But that’s the beauty of Unity.

GamesBeat: What do you think about whether 3D or 2D is going to become the biggest on mobile?

Helgason: I think it’s a mix. If you look at the top-grossing games, the ones that are made with Unity, two of them are 2D and one is 3D. If you look at the rest it’s also a nice mix. So I don’t think it’s either-or. Many games that look 2D are actually built in a 3D manner, too. There’s a lot of things like parallax effects that are easier to do in a 3D space. You just have to place the camera so it looks right. There’s some pretty amazing stuff coming out built like that.

The drastic fall of Zynga on Facebook is showing that their way of building games — not focusing on anything but 2D in a very simplistic world — is not necessarily sustainable. People do lose interest in it over time. Most of the social games companies… Some of them are adopting Unity just for personal projects. Others are actively shifting towards it in a big way. They like the flexibility of being able to mix and match.

Unity still has its weaknesses. It’s not perfect for 2D. But it’s gotten a lot better in the last couple of years. The community has built some amazing extensions for Unity that make it easy to work with a mix of 2D and 3D or even pure 2D. We’re also working in that direction. 2D is kind of a subset of 3D. You just place planes in front of the camera. Once you start working like that, there’s a lot of interesting opportunities that arise. I think at least half the games that are made with Unity, at least on mobile, are fundamentally or mostly 2D.

GamesBeat: How many employees do you have? Have you talked about revenues at all?

Helgason: We’re 210 people now. The only thing we’re saying about revenue is that we’re significantly profitable. We opened up some new offices, including some very strong local offices in Seoul, Tokyo, and Shanghai. We’re working very closely with companies there. We’re very proud of having a global company, where the leader of our Shanghai office speaks perfect Chinese, he’s from there, he knows everybody. He can go and talk to the studios on their terms and understand their problems. Today, in mobile, a third of our revenue is coming from Asia. The rest is split between the U.S. and Europe.

NaturalMotion is on a tear with its latest iPhone game, CSR Racing, which is generating more than $12 million in revenue per month. It’s doing so well that the company has acquired the game’s developer, the Boss Alien game studio in Brighton, England.

Of course, the game has only been out for six weeks, and the data is based on one full month’s worth of revenues. We can’t exactly extrapolate and conclude that the game will generate $144 million in a year’s time. But CSR Racing, which features beautiful 3D graphics, is the world’s top-grossing game on iOS (iPod Touch, iPhone, and iPad). Oxford, England-based NaturalMotion is focused on developing high-end 3D games as well as publishing those created by external developers. The success shows that the top games on the App Store are starting to generate some serious money.

CSR Racing is its seventh title in a row that has hit the charts for the company. The last one, My Horse by developer Munky Fun, was also a big hit for its realistic depiction of horses in a 3D environment. Torsten Reil (pictured above), the chief executive of NaturalMotion, said in an interview with GamesBeat that the company will increase its number of releases and now has six titles in development.

Apple showed off CSR Racing at its Worldwide Developer Conference in June, and the game launched as an exclusive on iOS on June 28. The free-to-play game makes money through the sale of licensed cars, which are selling at three times the rate of car sales in the real world. Reil said the company doesn’t spend much on marketing and that its titles go viral through word of mouth.

“This is a validation of the approach we are taking of doing console-quality games that are free to play,” Reil said. “The market is moving from 2D games to 3D games fast. The 3D games can generate more revenues with much higher margin.”

The Boss Alien studio is operated by former Disney Black Rock studio executives Jason Avent and Tim Swan. They will continue to run the studio as a stand-alone division. Terms of the deal were not disclosed.

“The entire Boss Alien team is excited to be joining NaturalMotion. We share the vision of creating amazing games that reach millions of people,” said Avent. “We’re very proud of what we’ve achieved together with CSR Racing, and now we’re focused on growing our studio and creating more hit games.”

“Our vision from the outset has been to focus on making games that people want to play – and to go viral through quality. Our combination of deep free-to-play monetization insights with polished gameplay and high-end 3D graphics generates margins impossible for the old type of 2D resource management games, especially those who have to aggressively spend to buy players.” said NaturalMotion CEO Torsten Reil.

NaturalMotion was founded in 2001 and initially created game development tools such as Euphoria and Morpheme to enable game developers to build realistic characters that look and move like real people. The tools have built-in physics so that motions look accurate and interaction with the characters seemed flawless. Many game makers licensed the technology.

But NaturalMotion tried without success to take on the giant of the sports game business, Electronic Arts, and its flagship title Madden NFL Football. NaturalMotion made a console game called Backbreaker Football, which featured brutally realistic football tackles. The concept was good. But when it debuted, the game was full of bugs, and critics panned it in 2010. NaturalMotion released a bug fix that cleared up many of the problems, but the game never recovered.

The company pivoted into the iPhone and iPad game business to get its second life in digital games. Using an outside developer, the company released a 99-cent version of Backbreaker on the iPhone in 2010 and saw millions of downloads. It then created a new studio, NaturalMotion Games, to develop iPhone games and launched games on the App Store such as Backbreaker 2: Vengeance, a sequel to the football title; and Jenga, based on the board game. Both feature cool physics simulations that had never appeared on a handheld device.

It published the Munky Fun title, My Horse, in 2011 and saw huge revenues from it. Reil said that each new title is giving the company more knowledge about how to handle monetization and gameplay loops. The company recently raised $12 million from Benchmark Capital in a second round of funding so that it can try to become the No. 1 iOS game company, Reil said. Competition includes Electronic Arts, Zynga, Epic Games, Gameloft, Glu Mobile, and many others.

Reil said that CSR Racing is growing revenues even faster than My Horse, and the company isn’t spending a lot of money on user acquisition, which is a big hurdle for a lot of iPhone game companies.

“The others have cash and will battle it out with user acquisition spending,” Reil said. “We don’t want to play that game.”

A multiplayer version of CSR Racing is coming later this summer, and Reil believes that will boost the game further. The firm now has 160 employees in Oxford, London, Brighton and San Francisco.

“We’re expecting the game to sustain its revenues through in-app purchases,” he said.

NaturalMotion isn’t yet tempted to move to Android or other platforms.

[Image credits: the company]

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